In March 2011, Mr Murphy appointed a Catholic as chairman, Sean Hogan, ahead of four others shortlisted after interview, all of them Protestants.

According to the tribunal, Mr Hogan was selected because “he was not from a Protestant background and because he was known to the minister and his (then Sinn Fein) ministerial colleagues”, Michelle Gildernew and Caitriona Ruane, who were consulted about the appointment.

The BBC has seen the 26-page decision issued to those involved.

It concluded: “The tribunal is in considerable doubt as to whether the merit principle was adhered to by the minister and whether Mr Hogan was the best candidate.”

It also said Mr Murphy had added new criteria to the selection process “in order to secure Mr Hogan’s appointment”, something it viewed as a breach of the code and procedures for appointments.

The tribunal disputed Mr Murphy’s claim he was unaware of the religion of the candidates.

“In the reality of the political and religious environment in Northern Ireland, the tribunal finds the minister’s evidence is implausible and lacks credibility.”

The tribunal also said that during Mr Murphy’s time as DRD minister – between 2007-2011, there was “a material bias against the appointment of candidates from a Protestant background”.

The findings added: “The tribunal is concerned that Dr (Malcolm) McKibbin as permanent secretary with DRD and currently head of the NI Civil Service was not more aware of the situation.”

The tribunal rejected Mr Lennon’s claim there was also political discrimination, saying there was “a paucity of evidence”.

The Fair Employment Tribunal has now said it is satisfied that the successful candidate, Sean Hogan, was appointed as chairman of NI Water “because he was not from a Protestant background and because he was known to the Minister and his ministerial colleagues”.

Dr Lennon, a Protestant, was interviewed for the post and was deemed appointable by the selection panel, along with three other Protestant candidates and one Roman Catholic candidate.

He made the case that he believed that he had greater relevant experience than the successful candidate and further argued that the Minister Conor Murphy added new criteria to the essential criteria established at the beginning of the process, in breach of the Public Appointments Commissioner’s Code.

The Tribunal was satisfied that three factors were introduced by the Minister as additional essential criteria and that “the provisions of the Code do not, in the Tribunal’s view, permit the use of additional criteria”.

The tribunal also found that over a four-year period during 2007-2011 when Mr Murphy was in charge of the department that “there was a significant disparity” between the success rates of Protestant and Catholic applicants and “that a Catholic applicant was at least twice as likely to be appointed than a Protestant applicant”.

“The tribunal is satisfied that there was a material bias against the appointment of candidates from a Protestant background within [the department].”

Earlier, the former minister said his decision had been audited and approved by the appointments commissioner.

However, former commissioner Felicity Houston said: “We did audit the process, but it now transpires having read the report of the case that we weren’t shown all the information, all the paperwork that went with that particular competition

“If we had I think I would have had a very different view of what was going on.”

She added: “The permanent secretary, Malcolm McKibben, the minister and other senior officials met as they do frequently, but the minister was given the names of these five candidates prior to getting his detailed submission.

“That meant he knew who they were several days before he got the detailed papers that explained who they were, what they did and their experience, and that’s a serious flaw, that should not happen.”